Cost Allocation Reform Update

Transcription

1 Cost Allocation Reform Update Regional Expansion Criteria and Benefits Working Group May 18, 2017

2 Conditions Precedent for Regional Transmission Investment 1. Increased consensus regarding the issue(s) for regional transmission solutions to address (i.e. increased policy consensus), 2. A robust business case for the project(s), 3. Clearly defined cost allocation methods that closely align who pays with who benefits, and 4. Cost recovery mechanisms that reduce financial risk 2

3 Guiding Principles for Transmission Cost Allocation Review Improve alignment of benefits and costs Eliminate cost allocation gaps with neighbors Clearly define cost allocation for all projects that are an outcome of the MISO regional transmission planning process (i.e. the MTEP) Ensure cost allocation is not an impediment to beneficial transmission investment (e.g. sub-regional MVPs, sub 345kV interregional economic projects) 3

4 Cost Allocation History Cross Border cost allocation for reliability and market efficiency projects incorporated in MISO-PJM JOA MISO filed Order 1000 interregional cost allocation filings with PJM, SERTP, and SPP Interregional Order 1000 compliance filings accepted (2016) Cost allocation for MISO began with Order 2003 which instituted a pro forma Generator Interconnection Procedures and Agreement. RECB I and II Baseline Reliability, Generator Interconnection, and Market Efficiency cost allocation MISO cost allocation for Multi Value Projects accepted by FERC MEP changes to 100% APC benefit metric and LRZ cost allocation is accepted by FERC. Acceptance of MEP and MVP methodologies for Order 1000 compliance and removal of regional cost allocation for BRPs. RECB Task Force begins cost allocation issue review The RECB Task Force was established in 2004 to develop criteria for all transmission projects in MTEP and methods for allocation and recovering costs based on measures of benefit. 4

5 Focus of Cost Allocation Review Reflects Desire to Improve Matching of Costs and Benefits Define Cost Allocation of Sub 345kV Economic Projects Improve cost/benefit matching through cost allocation Address confusion regarding current practice (direct assignment to constructing TO pricing zone) Change to cost allocation? Cost allocation gaps with neighboring planning regions can create a barrier to valuable transmission investment Potential 206 complaint if not addressed NIPSCO complaint is illustrative Refine Cost Allocation for Multi Value Projects Transmission has multiple benefits in addition to adjusted production cost Portfolio requirement makes it impossible to address sub-regional issues with MVPs A change in the portfolio requirement will require a change in cost allocation (i.e. more granular allocation) 5

6 Open Questions What is the impact on Competitive Transmission Administration process? Distinction among project types Should we continue to have multiple project types? If so, is there appropriate distinction between MEP and MVP? Where should the metrics that support the Business case be developed for regionally cost shared projects? 6

7 Multi Value Projects

8 What is a Multi Value Project? A Multi Value Project is one or more Network Upgrades that address a common set of Transmission Issues A Multi Value Project must meet one of three criteria 1. Enabling the Transmission System to reliably and economically deliver energy in support of documented energy policy mandates or laws, or 2. Provide multiple types of economic value across multiple pricing zones with a Total MVP Benefit-to-Cost ratio of 1.0 or higher, or 3. Address at least one Transmission Issue associated with a projected violation of a NERC or Regional Entity standard and at least one economic-based Transmission Issue that provides economic value across multiple pricing zones 8

9 MVP Benefit Metrics in the Tariff Production cost savings Capacity losses savings where capacity losses represent the amount of capacity required to serve transmission losses during the system peak hour including associated planning reserve Capacity savings due to reductions in the overall Planning Reserve Margins resulting from transmission expansion cost savings realized by Transmission Customers by deferring or eliminating the need to perform one or more projects in the future Any other financially quantifiable benefit to Transmission Customers 9

10 Application of MVP Cost Allocation Mechanism Supported by Robust Business Case Congestion & Fuel Savings Operating Reserves* Planning Reserve Margin* Transmission Line Losses* Wind Turbine Investment* Future Transmission Investment* Total Costs (Sum of Annual Revenue Requirements) MTEP 2015 Net Benefits Benefit by Value Driver (20 to 40 year present values, in 2016$ million) $2,246-$2,570 $348-$1,254 $20,965- $57,337 $10,423- $21,545 $16,777- $49,915 $0 $970-$2,814 $299-$1,106 $10,542- $35,792 $8,363- $34,702 Total Benefits Net Benefits 1 2 Increased Market 10 Efficiency 3 4 Deferred Generation Investment 5 6 Other Capital Benefits * Value from MTEP14 MVP Triennial Review **MTEP16 Report Chapter 7.2

11 Multi Value Project Portfolio MTEP11 Multi Value Project Portfolio Business Case 11

12 MVP Cost Allocation Today Multi Value Projects: Costs of Multi Value Projects will be allocated as follows: One-hundred percent (100%) of the annual revenue requirements of the Multi Value Projects shall be allocated on a system-wide basis to Transmission Customers that withdraw energy, including External Transactions sinking outside the Transmission Provider's region, and recovered through an MVP Usage Charge pursuant to Attachment MM. 12

13 MVP Hypothesis Costs of Multi Value Project(s) will be allocated as follows: X% of the Revenue Requirements of Multi Value Projects will be recovered from Transmission Pricing Zones on a subregional postage stamp basis and Y% based on Transmission Pricing Zone share of the cumulative benefits calculated in support of the project Strike: A Multi Value Project must be evaluated as part of a Portfolio of projects, as designated in the transmission expansion planning process, whose benefits are spread broadly across the footprint. 13

14 Market Efficiency Projects

15 MEP Cost Allocation Strawman 1. Lower MEP voltage threshold from 345kV 2. Remove footprint wide postage stamp allocation of costs for MEPs going forward 3. Allocate costs of all MEPs (per voltage threshold) solely to the benefitting Transmission Pricing Zones (TPZ) 4. Explore additional quantifiable economic benefits 15

16 MEP Hypothesis Define cost allocation for MEP s down to 100kV Could have multiple tiers Could include 100% local TPZ allocation Seeking to develop as much stakeholder consensus as possible Will use a series of polling questions to develop a solution At a minimum address interregional inconsistency with SPP and PJM 16

17 Path Forward

18 Proposed approach to benefit metrics evaluation Focus benefit metrics discussion on MVP metrics (four tariff metrics plus additional metrics guided by stakeholder survey) Forums for metrics discussions RECBWG will assess policy issues (e.g. determine which metrics should be developed) Calculation methodologies will be developed in technical forums (EPUG/PS) Periodic updates to RECBWG regarding progress of technical evaluations

19 Regional Planning and Cost Allocation High Level Work Plan Draft Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 - Q4 Regional Transmission Overlay Study Overlay Analysis and Stakeholder Collaboration Policy and Analytical Issues Identification Futures-driven roadmaps Full list of transmission issues Issues selection and Candidate Regional Plan Analysis Candidate Projects Business Case BOD Approval Benefit Metrics Define Calculation Method for Base Metrics Finalize Base Metric Calculation Methodology Define New Metrics (If Needed) Transmission Cost Allocation Review Evaluate Cost Allocation Policy Issues Cost Allocation Proposal Tariff Drafting File at FERC Effective Date EPUG / PAC EPUG / RECBWG RECBWG 19

20 Cost Allocation Schedule Apr Introduced decision for comprehensive review Sept Finalize issue summary paper, lays out a high level work plan Jan RECB prioritizes issues Feb MISO creates work plan for high priority issues through 2016 RECB engaged in discussions to validate these issues and identify others Dec MISO presents MEP cost allocation strawman Q1-Q Deeper dive into main elements suggested in strawman Q4-Mid Draft tariff changes if necessary and review File tariff edits, if necessary Issues Summary Paper Q Present Strawman December 2016 Present MISO Cost Allocation Proposal November 2017 Effective no later than 1/1/2019 Stakeholder Issues Review Q2- Q Issues Evaluation and risk management Q1-Q File reforms at FERC no later than June

21 21 Appendix

22 MISO Regional Cost Allocation Project Type Description Allocation to Beneficiaries Multi-Value Project Market Efficiency Project Baseline Reliability Project Generation Interconnection Project Transmission Delivery Service Project Participant Funded Address energy policy laws and/or provide widespread benefits across footprint Reduce market congestion when benefits are 1.25 in excess of costs NERC Reliability Criteria Interconnection Request Transmission Service Request Projects that are funded by the project requestor, often not the TO. The requestor funds the project (i.e. pays up front through a contribution in aid of construction (CIAC), which excludes the project from a TO s rate base and zonal rates. 100% postage stamp to load 345 kv and above: 80% distributed to Local Resource Zones commensurate with expected benefit, 20% postage stamp to load; 100 kv to 344 kv (IMEPs with PJM only): TBD 100% allocated to local Transmission Pricing Zone Primarily paid for by requestor; 345 kv and above 10% postage stamp to load. Generally paid for by Transmission Customer; Transmission Owner can elect to roll-in into local Transmission Pricing Zone rates The requestor funds the project (i.e. pays up front through a contribution in aid of construction (CIAC), which excludes the project from a TO s rate base and zonal rates. Other Project that does not qualify for other cost allocation mechanisms. Can be driven by reliability, economics, public policy or some combination of the three. The costs of these projects are recovered in zonal rate. 22

23 Cost Allocation Between MISO Planning Areas Type and Location of Project MTEP Projects terminating exclusively in one Planning Area MTEP Projects terminating in both Planning Areas Approved Before Transition Period Treatment During Transition Period Within Midwest Planning Area Treatment After Transition Period Within Midwest Planning Area Approved and/or Identified During Transition Period Treatment During Transition Period Within applicable Planning Area Not Applicable Not Applicable Applicable to both Planning Areas Treatment After Transition Period Within applicable Planning Area Applicable to both Planning Areas Approved after Transition Period Ends Applicable to both Planning Areas Applicable to both Planning Areas Source: MISO Tariff, Attachment FF-6 Planning Areas Refer to MISO Midwest and MISO South 23

24 MISO-PJM Interregional Cost Allocation Cost Allocation Methodology Project Type Description Project Requirements RTO Project Share MISO Allocation Targeted Market Efficiency Project (TMEP) Alleviates historical M2M congestion in both RTOs $20 million; In Service by 3 rd Summer Peak after approval Ratio of each RTO s Day Ahead and Excess Congestion Fund congestion, offset by historical M2M payments MISO portion allocated to MISO beneficiaries using historical nodal load congestion contribution data aggregated up to the TPZ level Interregional Market Efficiency Project (IMEP) Reduces market congestion in both RTOs Qualifies as MEP or MVP* in MISO and economic transmission enhancement or expansion in PJM; Gen GLDF of 5% or greater in each RTO MISO: 100% APC PJM: Double 345 kv+: 50% APC, 50% NLP; 100 kv Single 345 kv: 100% NLP MISO portion allocated the same as a regional MEP (80% APC to LRZs/20% Postage stamp). Note: For MISO-PJM IMEP only, voltage threshold is 100 kv Interregional Reliability Project (IRP) Displaces reliability projects in both RTOs Qualifies as BRP or MVP** in MISO and BRP in PJM Ratio of avoided project costs in each RTO Costs assigned based on the allocation of the avoided regional project Cross-Border Baseline Reliability Project (CBBRP) Needed to efficiently meet reliability criteria Qualifies as BRP in MISO or PJM DFAX of RTO generation to respective RTO load Wholly MISO: project is allocated like a BRP (100% to local TPZ); Wholly PJM: TBD Interregional Public Policy Project (IPPP) Displaces public policy projects in both RTOs Qualifies as MVP*** in MISO and economic or reliability project in PJM Ratio of avoided project costs in each RTO Costs assigned based on the allocation of the avoided regional project * Meeting Criteria 2 or 3 ** Meeting Criterion 3 *** Meeting Criterion 1 24 Note: Per the MISO-PJM JOA, projects that could qualify as an IRP and CBBRP will be cost allocated as an IRP

25 MISO-SPP Interregional Cost Allocation Cost Allocation Methodology Project Type* Description and Requirements RTO Project Share MISO Cost Allocation Reliability Necessary to meet NERC reliability criteria; Displaces reliability projects in both RTOs APC + Avoided Cost MISO portion allocated to local TPZ(s) Wholly MISO or MISO-SPP Tie: 345 kv+ Allocated as a MISO MEP: 80% APC to LRZs, 20% Postage Stamp Economic Project that alleviates market congestion in both RTOs 100% APC Wholly SPP: 345 kv+ MISO-SPP Tie: <345 kv Allocated 100% APC to benefiting LRZs (No Postage Stamp) Allocated 100% to the local TPZ(s) Wholly MISO: <345 KV Allocated 100% to the local TPZ(s) Wholly SPP: <345 kv No MISO cost allocation mechanism Public Policy Displaces public policy projects in both RTOs Avoided Cost Costs assigned based on the allocation of the avoided regional project *Refers to the primary project driver 25

26 MISO-SERTP Interregional Cost Allocation Cost Allocation Methodology Project Type Description and Requirements RTO Project Share MISO Cost Allocation MISO-SERTP Interregional Project Displaces a reliability, economic or public policy driven project(s) and meets the following requirements: Interconnects to transmission facilities in both SERTP and MISO regions Combined B/C ratio > 1.25* Meets criteria for inclusion in the respective regional plans Ratio of avoided project cost Costs assigned based on the allocation of the avoided regional project *Benefits are quantified by the total avoided cost of projects displaced by the interregional project 26

27 MISO Local Resource and Transmission Pricing Zone Map Local Resource Zone 1 Transmission Pricing Zone(s) DPC, GRE, MDU, MP, NSP, OTP, SMP 2 ATC 3 ITCM, MEC, MPW 4 AMIL, CWLP, SIPC 5 AMMO, CWLD 6 BREC, DEI, HE, IPL, NIPS, VECT 7 METC, ITC 8 EATO 9 CLCE, ELTO, ENTO, ETTO, LAFA 10 EMTO, SME 27 Source: MISO Tariff Attachment WW